Britain's bankers have warned that tough new laws on pay and bonuses to be
announced in Parliament this week could trigger an exodus of talented
professionals and stifle economic growth.

The British Bankers' Association (BBA) said the Financial Services Bill – which would require regulators to tear up existing contracts if pay packages were deemed to encourage excessive risk-taking – would threaten the UK's prominence as a global financial centre.

"British banking is a global business and many of our banks operate outside the UK. Moves to bind how our banks operate overseas could put the industry at a serious disadvantage and also discourage global banks from coming to the UK. This would be a major problem for the economy as well as bad for business," said Angela Knight, chief executive of the BBA.

"What we need to see is the preservation of high-quality talent and international banks operating here. The Chancellor has to have that competition focus fully in his sights," she said.

She said that no other country had plans for such legislation, which is to be outlined in the Queen's Speech on Wednesday, and added that if international banks opted to leave the country they would take jobs and gross domestic product with them.

However, Lord Myners, the City minister, said bankers who were willing to take excessive risks and threaten the British economy were not welcome. He said: "It might drive out people involved in excessively risky activities, but we don't want reckless people here.

"It is very important that we have a viable and profitable, but also a stable, secure and de-risked financial centre. We're trying to make sure we have a responsible framework so that the taxpayer will never again have to step in."

It is understood that banks based outside Britain and within the EU, but with UK subsidiaries, will not be subject to the rules because they are not regulated by the FSA.

The Conservatives said the plans for the bill were about little more than "headline-chasing". Philip Hammond, the shadow chief secretary to the Treasury, said: "The public will be asking what this means for the bonuses that are due to be paid this Christmas – and the answer is nothing at all. When we announced plans to stop significant cash bonuses being paid this year the Government was quick to criticise before eventually agreeing with us. It is clear that Labour prefers to talk about laws that would only be effective after a general election."

The new rules would be imposed next year, if the Bill completes its passage through Parliament by the next general election, which must be held by June 3. Lord Myners said he was confident the Bill would be passed in time.

Vince Cable, the Liberal Democrat Treasury spokesman, said he did not see the need for new legislation because the FSA already had considerable powers. He said bankers paid more than £200,000 should have to make a full disclosure.

What to expect from the Bill

FSA to be given power to tear up existing contracts if pay packages incentivise risk

Consumers will be allowed to launch class action suits

Banks to be brought to account when FSA receives a group of similar complaints about mis-selling